Energy sector privatization fever has spread even to the small Communist nation of Laos.

Although the emphasis is on that country's large hydropower potential, there obviously remains room for oil and gas in a nation that obtains about 90% of its energy from burning wood. Oil accounts for only 5% of the Laotian energy mix and electrical power the other 5%.

Domestic energy consumption is rising rapidly in the landlocked country of 4.2 million, where the gross domestic product is a per capita $210/year. Although the economy remains among the world's poorest, reforms by President Kaysone Phomvihane, who died last week after dominating Laos' government since 1975, have led to steady economic growth.

ECONOMIC POLICIES

One of the key economic policies is to attract private investment in development of new power generation capacity in Laos.

Total installed capacity of electrical power in Laos is 215,000 kw hydro and 15,000 kw diesel powered. About 75-80% of the output from Laos' two largest hydropower plants is exported to Thailand. Laotian power exports to Thailand are its second biggest export item, accounting for 25% of its total export earnings.

Estimates are that Laos has hydropower potential of more than 18 million kw, but the cash strapped country can afford to tap only 1% of that potential.

Accordingly, Vientiane is making changes in its economic policy that sees the private sector playing a central role in the country's economy. Laotian Vice Minister of Industry and Handicrafts Khammone Phonekeo says a totally new legal framework is being implemented to stimulate and support private sector activity in the country's development. New laws have been enacted to attract and guide foreign investment. Laos' National Assembly in August adopted a new constitution that guarantees fundamental private investment and property rights. And the government is rapidly privatizating about 150 state enterprises open to foreign and domestic investment.

While the energy focus remains on hydro, these measures are encouraging for petroleum companies seeking opportunities in Laos, where the government recently invited for the first time foreign companies to participate in oil and gas exploration (OGJ, May 18, p. 19).

Diplomats say Kaysone's death won't materially change the country's political outlook, given the pragmatic course he set. However, as we've seen in Latin America, privatization and openness usually are accompanied by an increased profile by environmental groups or so Conoco Inc. and others have found in pursuing projects in the South American rain forest (OGJ, July 6, p. 43).

RAIN FOREST CONCERNS

If there's anything rain forest advocates dislike more than oil and gas drilling, it's projects that chew up vast chunks of the forest-such as hydroelectric dams.

Is it too much to speculate that, in the not too distant future, a Lao green group might loudly embrace developing Laotian oil and gas for domestic use and export to preserve a rain forest shrinking under the onslaught of wood fuel consumption or giant hydro projects?

Is that much more of a stretch than 5 years ago predicting the fall of the Berlin Wall and the U.S.S.R.'s collapse?

Copyright 1992 Oil & Gas Journal. All Rights Reserved.

WATCHING THE WORLD LAOTIAN STYLE PRIVATION

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